So said Robert Burns, Scotland’s most famous literary figure, reflecting on seeing a louse on a lady’s bonnet during a church service. Roughly translated, Burns was saying how good it would be if we could view ourselves objectively.

It is with considerable disappointment that New Zealand and many New Zealanders – with political and economic commentators amongst the worst – continue to misunderstand debt and, in particular, New Zealand’s debt situation.

The first article in this series briefly explored who trades, noting that it is individual people and firms who trade, not nations. This article continues my description of trade from a fundamental perspective by exploring why individual people and firms trade.

The United States has elected Trump, Britain has Brexited with talks of exiting from the Common Market, and an agreement between the EU and Canada looks shaky. Clouds gather on the world of free trade as people express concern over international trade and nationalist sentiment rises.

Although the news has been less dominated during the past 12 months, or so, with talk of the global financial crisis and its aftermath, the IMF is still deeply concerned with the state of the world economy. Hence, the quotation above, which is the somewhat gloomy sub-title of the organisation’s World Economic Outlook, October 2014.